USD Coin (USDC) is a stablecoin designed to keep a constant one-to-one value with the U.S. dollar. Stablecoins like USDC aren’t really seen as investments, instead offering liquidity for crypto traders looking to purchase other cryptocurrencies seamlessly on exchanges.
What Is USD Coin?
USD Coin is a stablecoin built on the Ethereum (ETH) blockchain. Like other collateralized stablecoins, USD Coin’s value is pegged to the U.S. dollar. That means that one USDC should ideally always be worth one dollar.
There are more than 19,000 cryptocurrency projects out there, but USDC is one of the biggest. In fact, it earns a top billing as the second biggest stablecoin after Tether, with more than $51 billion worth in circulation as of writing. It’s also the fourth largest in market cap among all cryptos.
USD Coin was launched in 2018 by Centre, a consortium founded by Circle and Coinbase. It was created to be a regulated stablecoin that “works within U.S. money transmission laws and regulations” while running on blockchain technology.
Similar to concerns made about Tether, USDC was flagged last year for not backing each USDC with an asset or dollar equivalent.
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Centre responded to these revelations in August 2021, saying it would change the makeup of USDC’s reserve and that the underpinnings of the coin would be held entirely in cash and short-duration U.S. Treasurys.
That recent move now means either one dollar or asset-equivalent backs every USDC.
Increasing some transparency, accounting firm Grant Thornton audits those accounts and posts monthly draft attestation reports accessible to the public.
Fabio Pezzotti, CEO of Milan-based crypto investment fund Iconium, says, “With its launch coming after the concerns raised about Tether’s lack of transparency, USDC aims at providing all the advantages of a stablecoin while being fully transparent to users.”
USDC in the Digital Economy
USDC investors generally use their holdings to earn passive income. You can lend USDC directly through its issuer, Circle, or with a hardware wallet like Ledger.
USD Coin holders can also earn additional passive income through specialty online savings accounts designed exclusively for stablecoins.
Experts say stablecoins often receive the highest returns because they maintain their expected value.
You can earn appreciable interest on your USDC, substantially higher than the typical online savings account. USDC holders can use Bitcompare to find the most attractive yields currently on offer.
Where Can I Buy USDC?
You can buy USDC at several different crypto exchanges. Here are a couple of places where you can exchange U.S. dollars for USDC:
Since USDC is a stablecoin, it’s not “paired” in the true sense of other crypto pairings. But more than a few exchanges let you purchase other cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) using USD Coin:
If you want to use your USDC to purchase other crypto coins like Litecoin or Dogecoin, you can make that happen on KuCoin.
How to Buy USDC
If you’re ready to buy USD Coin and assume the risks of cryptocurrency investment, it only takes a few steps to get started:
1. Choose a Crypto Exchange
To buy USDC in the U.S., you’ll need to use a crypto exchange. A cryptocurrency exchange is an online marketplace where you can buy and sell crypto.
You should review a few different platforms to find the best cryptocurrency exchange for your needs. Exchanges have widely different user interfaces, fees and rules. A little research can help you feel comfortable with the exchange you choose.
2. Buy USDC
Once you’ve found the perfect exchange, you’re ready to buy USDC. While USDC’s backing has kept its value stable to date, it’s still a cryptocurrency and risks losing value. Be sure to only fund your account with money that you won’t need for monthly expenses or emergencies.
You can place an order on your chosen exchange with just a few steps:
You’re now the proud owner of USD Coin.
3. Store Your USDC
Once you purchase USDC, there are lots of different crypto wallets where you can store your coins:
What Can You Buy With USDC?
According to Cryptwerk, more than 600 merchants accept USD Coin as payment. These various merchants let you use your USDC in a variety of ways:
And, of course, you can also use your USDC in the traditional sense to buy other cryptocurrencies.
Should You Buy USDC?
Stablecoins have had a rough streak lately, causing ripples across the cryptocurrency landscape. Despite headwinds in the crypto market amid the TerraUSD stablecoin crash in May, which wiped out $42 billion for UST and LUNA holders, USDC managed to maintain its $1 peg.
But crypto traders shouldn’t think of USDC as an investment, although it’s a coin with some advantages.
“USDC isn’t inherently an investment vehicle,” says Axel Nussbaumer, vice president of digital asset management at Dallas-based crypto mining firm Blockmetrix. “But it does a perfectly fine job of serving its intended purpose—to allow traders to derisk, avoid volatility and transact cheaply and quickly.”
Just because USDC might be perceived as a safer, more credible port to ride out the stablecoin storm than other coins, current economic conditions should be considered.
And remember, no investment is without risks.
When buying USD Coin, factor in your financial goals and see if the risks make it the right buy for you.
